Nab View: Crude Oil markets may tighten significantly

Saturday morning Saudi Arabia time, the world’s largest oil refinery at Abqaiq sustained at least 10 strikes from suspected weaponised drones. Yemen’s Iran backed Houthi rebels have claimed responsibility. The immediate impacts of the attacks include:

• 5.7 million barrels of crude oil and 2 billion cubic feet of gas output per day is offline (about 5.5% world crude refining capacity). An official statement from Armaco on the extent of damage and production outages is expected.
• Armco has said it will meet customer deliveries out of stockpiles for the time being.
• The IEA has said it stands ready to release reserves to meet market shortfalls.
• The US has similarly echoed its willingness to release supply from the US’ Strategic Petroleum Reserve (holding 644.8 million barrels as of Friday) should they be needed.

Crude oil and product prices should lift near term from direct impacts, and added uncertainty on Abqaiq’s expected recovery time. But a quick restart would see bullish crude oil prices move as short lived.

For the full picture, download the report- Commodity Watch: Crude Oil.